SEC Proposes SPAC Rules

During the last two years, more than half of all IPOs were conducted by SPACs.3 Proposing Release In the Proposing Release, the Commission proposes: (1) new Subpart 1600 of Regulation S-K setting forth certain specialized disclosure requirements in SPAC IPOs and in de-SPAC transactions; (2) rules and amendments designed to align the disclosures and legal obligations of companies in de-SPAC transactions more closely with those in traditional IPOs; (3) new Securities Act Rule 145a, which would deem any business combination of a reporting shell company with an entity that is not a shell company, to involve a sale of securities to a reporting shell company's shareholders; (4) amendments to Regulation S-K relating to disclosure of projections; and (5) a safe harbor under the Investment Company Act of 1940 (1940 Act).4 Specialized Disclosure Requirements The Proposing Release provides for the addition of new Subpart 1600 of Regulation S-K that would set forth certain specialized disclosure requirements in SPAC IPOs and in de-SPAC transactions.5 Subpart 1600 would require, among other things: * Additional disclosures about the sponsor of the SPAC and potential conflicts of interest in registration statements filed in connection with SPAC offerings and de-SPAC transactions. Proposed Item 1607 also would require disclosure of, among other things, (i) the qualifications and method of selection of the outside party, (ii) any material relationship between the outside party and its affiliates, on the one hand, and the SPAC, its sponsor and/or their affiliates, on the other hand, during the past two years and any compensation received pursuant thereto, and (iii) a summary of the report, opinion or appraisal;9 * Additional disclosure on the background and reasons for the transaction;10 and * Certain disclosures on the cover page of the prospectus and in the prospectus summary of registration statements filed in connection with SPAC IPOs and de-SPAC transactions.11 Aligning de-SPAC Transactions with Traditional IPOs The proposed rules and amendments are intended to provide investors with disclosures and liability protections comparable to those they would receive if the operating company were to conduct a traditional firm commitment IPO.12 The proposed rules and amendments would, among other things: * More closely align the disclosure requirements for the operating company in a de-SPAC transaction with the requirements in a Form S-1 or Form F-1 for an IPO. [...]persons wo